The SEC once again "strikes" to regulate NFTs. Will royalties also be hit with an "iron fist"?
In the NFT trading market, is "casinoization" no longer a joke?
Is Milady's "fall" in progress?
APE DAO is going to use hundreds of millions of dollars to buy back Yuga assets?
BlockBeats reviews the latest NFT news from last week with you!
The SEC once again "strikes" to regulate NFTs, will royalties also be hit with an "iron fist"?
Half a month ago, the third issue of NFT News reviewed the SEC’s first regulation of NFT projects, and BlockBeats reported the incident in detail at the first time. (Recommended reading: Is NFT a huge negative? The SEC regulates NFT for the first time in history)
Unexpectedly, the SEC's second regulation of NFT projects came so quickly. The NFT project accused of "unregistered securities" this time is Stoner Cats. Stoner Cats issued a total of 10,420 NFTs at a price of 0.35 ETH (about $800) on July 27, 2021, and sold out within 35 minutes.
Stoner Cats
Without admitting or denying the SEC's findings, Stoner Cats accepted the SEC's cease and desist order and paid a $1 million civil penalty. Stoner Cats also agreed to destroy all NFTs it owns or controls and post notice of the cease and desist order on its website and social media. In addition, a fair fund will be established to return the funds paid by damaged investors to purchase NFTs.
Let’s look at the details of the SEC’s allegations against Stoner Cats:
- Before and after the sale to the public, Stoner Cats NFTs conducted an extensive media campaign to promote the project, on its official website and social media including podcasts, YouTube, Twitter, Instagram and Discord, as well as in interviews with well-known network and cable TV programs. In these promotions, Stoner Cats and its representatives stated that the proceeds from the NFT issuance would be used for the production of the Stoner Cats online video series, and emphasized the benefits of holding Stoner Cats NFTs, including exclusive access to Stoner Cats content, and the ability to permanently access any other content created by Stoner Cats in the future; exclusive access to the Stoner Cats community on Discord, and the ability to participate in various activities, competitions and interactions with the creators of the animated show; and the ability for holders to resell their NFTs on the secondary market.
- Stoner Cats emphasizes that its team has the qualifications to execute the project plan, but its animation is far from being completed at the time of NFT issuance (the last episode was launched 15 months after the release). Stoner Cats tries to convince investors that both the animation and NFT will be successful with their efforts. In the media promotion activities, Stoner Cats emphasizes that they have Hollywood producers and famous animators, writers and editors, and mentions the successful works of these professionals in the past. Stoner Cats also emphasizes that some people in its team have in-depth knowledge of Crypto projects, especially NFT. Through these actions, investors expect to profit from the success of Stoner Cats, because a successful online animation may lead to an increase in the value of Stoner Cats NFT in the secondary market.
- Investors were told that the Stoner Cats NFT is akin to a "ticket" and "if people don't appreciate it, you can sell the ticket." Investors were also told that "the more successful the animation, the more successful your NFT will be."
- After the initial public offering, Stoner Cats' Twitter account often touted the sales of its NFTs in the secondary market and encouraged the public to buy. Specific situations include: On September 7, 2021, Stoner Cats' official Twitter account released an emoticon suggesting that during the decline of the Crypto market, the wisest thing to do is to "buy more ETH and sweep the floor of Stoner Cats"; On August 9, 2021, Stoner Cats' official Twitter account highlighted the last four NFT sales with ETH pricing, which were converted to US dollars at $137,493, $124,994, $31,134 and $17,123 respectively; On August 9, 2021, Stoner Cats' official Twitter account emphasized that it currently has 3,376 holders, and also emphasized that the floor price at that time was 0.5 ETH and the trading volume at that time was 3700 ETH.
- Prior to release, a Stoner Cats programmer contacted an NFT trading platform to "verify" the Stoner Cats NFT series, which ensured that its team would receive royalties from secondary market transactions. More importantly, Stoner Cats assured secondary market buyers that they were purchasing authentic Stoner Cats NFTs, which facilitated secondary market transactions of Stoner Cats NFTs. Stoner Cats NFTs began trading on the secondary market immediately after minting. There were at least 10,475 secondary market transactions for Stoner Cats NFTs between July 27, 2021 and June 2, 2022. In these transactions, thousands of buyers spent more than $20 million worth of ETH to purchase Stoner Cats NFTs.
Carolyn Welshhans, deputy director of the SEC’s enforcement division, said, “Securities registration, including crypto assets, protects investors by providing them with information disclosure so they can make informed investment decisions.” “Stoner Cats wanted to reap all the benefits of offering and selling securities to the public, but ignored the legal responsibilities that come with doing so.”
Of course, there are also people within the SEC who objected to this regulation. They are still the two commissioners Hester M. Peirce and Mark T. Uyeda who raised objections last time. The two commissioners said, "Whether artists are selling numbered versions of physical prints for fans to display on the wall, or selling NFTs for fans to display on social media, artists should get clear guidance on whether and how securities laws apply. Artists of all kinds have long been trying to support themselves, and NFTs provide them with a potentially viable way to monetize their talents. The fact that money is involved does not convert NFTs into securities." They also used the "Star Wars Early Bird Certificate Package" sold by Kenner Toy Company in 1977, which can be exchanged for future Luke Skywalker, Princess Leia, R2-D2 action figures, and memberships of the Star Wars fan club, to illustrate that Stoner Cats is just a new popular phenomenon in the new digital age.
Another interesting debate about this matter comes from @Loopifyyy, who, according to ChatGPT’s reply, asked whether the fair fund used to compensate NFT investors in the injunction was established by the $1 million fine paid by Stoner Cats. As a result, NFT players started to ridicule Stoner Cats and the SEC, believing that Stoner Cats could continue to be happy after making $8 million and spitting out $1 million, and that the SEC was just collecting "protection fees" and was not really trying to protect NFT investors. However, if the Mint price was about $800 at the time, the $1 million was far from enough to compensate... In addition, the detailed injunction also mentioned that Stoner Cats would provide the SEC with a list of wallet addresses of holders, so this compensation may not be for the initial minter as some English circles understand.
I feel that this ridicule is still too early... However, the most important thing is that from these two charges by the SEC, we can see that whether there is a naked and direct promise of dividends is not a necessary condition for being charged. Stoner Cats drew the pie and finally served the pie, but they still have to be "iron fisted"...
As long as you read the details of the above charges, you will definitely feel how sufficient the SEC's evidence collection is on "calling orders". More and more NFT projects will probably start to tremble...
In the NFT trading market, is "casinoization" no longer a joke?
After the bear market, everyone always sighs pessimistically, "The NFT market is becoming more and more like a casino", and I am no exception. But this time, the NFT trading market has really started to gamble...
If you look at LooksRare's official Twitter account, you'll find that they've been pushing a new feature called "YOLO" recently. If you're a player of games like CSGO/DOTA2 where the cosmetics market is well developed, you'll definitely be familiar with this "YOLO" - throwing in some junk skins and winning all the skins in the game in a "roulette wheel"...
It's very simple. Every NFT player can throw in ETH/ERC-20 Token/ERC-721 NFT to gamble, and at least 0.01 ETH worth of assets must be thrown in. The probability of each participating player winning is the amount of his investment divided by the total investment amount of the round. For example, if you invest 0.5 ETH and all players invest a total of 10 ETH in the round, your chance of winning is 5%. In addition, LooksRare will take a 5% cut from each round of "roulette".
After the countdown ends, the gears of fate begin to turn. The most common thing that happens is of course that the big whale wins all the money of the small shrimp, but you know, there will always be the situation that our favorite small shrimp beats the big whale...
For example, in this round, the guy only invested 0.1 ETH, and with a 2.6% chance of winning, he defeated the big whale who invested 2.7 ETH and had a 70.31% chance of winning, and took away the 3.84 ETH prize pool. The guy went straight to the sky...
In addition to LooksRare, Magic Eden also launched a new feature called "Lucky Buy" last week. Unlike "YOLO", "Lucky Buy" is for a single NFT. For example, if the listing price of an NFT is 20 SOL, the buyer can choose to spend 10 SOL for "Lucky Buy", and there is a 50% probability of buying this NFT at the price of 10 SOL. If it fails, the $SOL will be taken away by Magic Eden, and the seller and creator will receive a 1% share. The failed player will receive Magic Eden's "diamond" as a consolation prize.
"Lucky Buy" currently only supports the Degenerate Ape NFT series
Although both are "pumping", Magic Eden's seems to be relatively mild. After all, we can also understand that this is a means to activate the liquidity of NFT transactions, and sellers and creators can also enjoy the benefits. However, the NFT market is indeed over, and there is no work to do in the trading market. It can only bite the lighter like Brother Dao...
Is Milady's "fall" in progress?
Milady, which is down more than 30% in the past week.
Milady Price Chart
What happened? First of all, there is a daily auction project in the Milady ecosystem, called "Bonkler", similar to Nouns.
「Bonkler」
On September 11, Milady founder @CharlotteFang77 tweeted that a Bonkler developer had embezzled approximately $1 million in assets from Bonkler’s treasury and attempted to control Milady-related social media accounts, and filed lawsuits against three individuals in the name of the individual and the parent company Remilia.
On September 13, Remilia creative director @Milady_Sonoro tweeted to refute Charlotte Fang's accusation. @Milady_Sonoro said that the Bonkler treasury was not stolen (checking the on-chain data, it was true), and claimed that they were co-founders of Remilia, which was established one year after the release of the Milady series and four months after the release of the Remilio series. Charlotte Fang not only did not have sole ownership of Milady's assets, but also suppressed their status and contributions. In addition, @Milady_Sonoro also accused Charlotte Fang of misappropriating funds, with a total misappropriation of US$2.6 million.
On the same day, Charlotte Fang hit back, claiming that Remilia had no so-called "co-founders" and no promises about equity distribution had been made. She had sole control over the assets used to fund Remilia's on-chain operations. Bonkler's contract ownership was not transferred to the agreed address, and the treasury assets were seriously threatened. Charlotte Fang also said that she received very little salary, and @Milady_Sonoro received the most generous salary, and even promised him 20% of Bonkler's income.
This incident has caused great harm to Milady. It is not only because of the "internal strife" in the team, but also because the cause of this "internal strife" is the issue of interest distribution (at least that's the perception for now). For a PFP project with decentralized meme as its core competitiveness, if this incident is not handled properly, it is very easy for everyone to feel that Milady is "no longer pure" and thus lose community cohesion.
This may be a bit abstract. If you can't understand the huge damage, think about the Azuki incident a while ago. The only difference is that the community no longer trusts the long-term vision of the project, and the community believes that the cultural identity established by the project has been disillusioned.
Here I have to sigh at the keen sense of smell of our rhythm colleagues. Last month, a colleague chose to sell Milady for a simple reason, that is, it felt "no longer pure". And I made a very leek-flavored statement, "Milady surpassing BAYC this year is an extremely low probability event, but it is not impossible"...
As I write this, my heart is filled with shame... shame!
APE DAO is going to use hundreds of millions of dollars to buy back Yuga assets?
Huang Licheng, the "Big Brother Machi", initiated the AIP-304 proposal in July this year. The proposal plans to use 11 million $APE in the APE DAO treasury to purchase Yuga assets (BAYC, MAYC, BAKC and CryptoPunks) and other famous NFTs (art and others) to form an asset collection called the "Digital Art Movement", and then curate the NFTs in the collection and grant NFTs to famous art institutions such as the Los Angeles County Museum of Art, the Getty Center, the Louvre, and the Metropolitan Museum of Art. The proposal also includes the issuance of $DAM Token to hand over the governance of the asset collection to the ApeCoin community. Huang Licheng himself promised not to control any asset-related keys, nor would he receive any personal compensation from the proposal.
The proposal was put to the vote on September 15 and will close on September 21. It is currently too close to call, with support and opposition almost 55-50. However, Huang Liben himself has not yet participated in the vote.
My personal opinion is that the vision of this proposal is still good. If the Bored Ape can be placed in the Louvre, there will definitely be a publicity effect. However, this proposal lacks many specific operational details. For example, if you want to give the Bored Ape to the Louvre, will they be willing to accept it? If you negotiate to specify a certain Bored Ape for exhibition, are there proper measures to ensure that it is not leaked? After all, if it is leaked in advance which Bored Ape will be exhibited in the Louvre, it will cost an unknown amount of money to buy the Bored Ape...
Also, is it really necessary to spend so much money to buy so many NFTs and send them to various regions for exhibition? Considering the continuous decline in the value of $APE, this may not be a good idea. Judging from the current voting progress, the community's recognition of this idea is not high.
One week project preview
New projects worth noting this week include:
CLOAKS
I admit that I still like these pictures (at least from the preview), and as the second generation of Nakamigos, this project is definitely worth paying attention to. But I have to say that Sartoshi's image has completely fallen...
The total amount of Nakamigos-CLOAKS is the same as Nakamigos, both are 20,000. The problem is that at the beginning, the official announced that these 20,000 will be charged, 0.05 ETH each, and even the holders of the first generation of Nakamigos have to pay. Although it was changed to free minting for Nakamigos holders under the strong protest of the Nakemigos community, I am still not optimistic about this project. Just like the cracks in Milady's cultural identity mentioned earlier, Nakamigos is also a decentralized meme and its art. It is difficult to separate this project. This kind of project makes people feel that "purity" is really very important. From announcing his "retirement" to returning to turn the "End of Sartoshi" series into a Pass card and bringing out Nakamigos, a project that has earned millions of dollars in royalties, Sartoshi has lost the "pure" label given to him by mfers (of course, I think it has been lost since the royalty issue of mfers earlier).
Speaking of the "End of Sartoshi" series, yes, the owner of "End of Sartoshi" has also been forgotten...
Regardless, the size and popularity of Nakamigos’ community is there. The project will be released on September 21, so we still have to keep an eye on it.
Nyan Balloon Season 3
At the beginning of the year, there was a wave of ERC-1155 burning gameplay. I reported on it in the article "Art Gamification of NFT": Burn-Redeem and Lottery", and also mentioned one of the star projects at the time - Nyan Balloon, the "Nyan Balloon" designed by the founder of Nyan Cat himself.
In fact, after the burning of the first season ended, Nyan Balloon has been continuing. The second season introduced more different flying Nyan Cat images that can be exchanged for burning. Now, the second season is about to end, and the third season will have more new images, such as the following Nyan Cat, a lumberjack flying with a mushroom balloon:
Of course, this project might be more suitable for consumption without as much hype room... I like Nyan Cat though :)
THE LESSON
Sugartown, which was mentioned in last week’s NFT news, has risen to a price of 0.3 ETH after Free Mint. It seems that people are still quite fond of and confident in gaming projects at this stage.
SOMO will probably be a spirit battle game, where you collect, upgrade, fight, and earn tokens. The description on the Premint page says that the former director of Jam City and members from EA, Rockstar, Blizzard and other teams will lead the game development. It is not as big as Zynga in Sugartown, but there is the expectation of tokens, so keep an eye on it...
PROJECT ZIRCON
This is also a game project. Compared with SOMO, it is really big. It is Konami’s first Web3 game project. If you are unfamiliar with Konami, you may have played “Contra”. They also have “Pro Evolution Soccer”, “Metal Gear Solid”, “Silent Hill” and so on.
The game is still very mysterious right now, with very little information to share here, but they will be showing off the project at the Tokyo Game Show on September 21st, so keep an eye out for it.
Conclusion
This is the 5th issue of "NFT News". The various things that happened last week are still very interesting. I hope that this article will not only provide you with valuable information, but also make you laugh while reading. In addition, although there were still no NFT projects with strong wealth effects last week, the rise of Sugartown can still give us some expectations for gaming NFT projects. This week I will work hard to dig out more gaming NFT projects, and look forward to sharing more information with you next week.
Let us look forward to what new NFT news will happen in the new week!